‘The fact is that many of those investors are things like pension funds…’
(Claire Russel, Liberty Headlines) Rep. Ilhan Omar, D-Minn., introduced legislation on Friday that would cancel rent and mortgage payments for all Americans amid the coronavirus pandemic.
The proposal would establish a relief fund for landlords and mortgage holders who depend on monthly payments, but it does not specify how much money this fund would include.
The bill does, however, specify the fines landlords will receive if they try to collect rent or take action against those who don’t pay. First-time violators will be fined $5,000 and up to $50,000 for three or more violations, according to Forbes.
“The coronavirus crisis is more than just a public health crisis—it’s an economic crisis,” Omar said in a statement, likening the rent suspension to the 2008 Wall Street bailout.
Omar’s plan would undoubtedly deepen that economic crisis if passed, according to economists.
“Those mortgages are often securitized,” Carol Galante, a professor at the University of California-Berkeley, told the website CityLab.
“They’re packaged up into bonds and they’re sold as investments, and those investors are expecting a certain interest payment off of those securities on an ongoing basis,” Galante explained. “If they don’t get those, then those investors suffer.”
So, suspending rent or mortgage payments for a long period of time would eventually affect the entire economy, Galante said. And the result would be disastrous.
“So you say, well, who cares about the investors?” Galante said. “But the fact is that many of those investors are things like pension funds.”
Those pension funds support teachers, first-responders and other essential industries we depend upon, Galante continued.
Omar’s proposal might “look good on its face,” said Kathleen Engel, a law professor at Suffolk University, “but there are effects that stem throughout the whole society.”
Omar’s bill is co-sponsored by the other members of the left-wing “Squad,” including Reps. Alexandria Ocasio-Cortez, D-N.Y., Rashida Tlaib, D-Mich., and Ayanna Pressley, D-Mass.